5.24pm: Meanwhile, Seumas Milne finds Nick Clegg's Q&A this afternoon sums up a party determined to look on the bright side:

Inside the Birmingham bubble, you'd barely know the Liberal Democrats were in any kind of pickle at all. Electoral massacre in May's council elections? Humiliation in their make-or-break electoral reform referendum? Poll support slashed in half? "Miserable sod", home office minister Lynne Featherstone told an unfortunate BBC reporter at a lunchtime fringe who was foolish enough to mention some of this. "We're in cracking form".

And so it seems most of them are. Licensed by David Cameron to play to the party gallery with abandon, one Lib Dem minister after another has laid into their Conservative partners and hailed their successes, real or imagined, in bringing the Tory beast to heel. The pupil premium, raising tax thresholds, banking reform, even saving the NHS - they've done it all. And when it came to Vince Cable's blood-sweat-and-tears turn this morning, the lugubrious business secretary pulled out every banker-bashing, mansion-taxing, executive pay-squeezing stop. By the time he sat down to a standing ovation, you'd think he'd announced a Roosevelt-style New Deal - instead of insisting, as he in fact did, that there was no alternative to a cuts and austerity package even the IMF is getting worried about.

Most delegates appeared determined to believe him. Even when it came to Nick Clegg's Q&A session this afternoon - and the leader's not exactly loved by his activists - they were so docile he joked it was like speaking to a "North Korean conference". After a series of the gentlest questions he must have had from a party audience in years, the deputy prime minister declared: "We must stop beating ourselves up". And so they have - maybe they know something the rest of us don't.

You are right about legal aid (and see Owen Bowcott's piece on Lib Dem resistance here). Ken Clarke is getting an easy ride on this one, because unlike forests, Bookstart and other issues the coalition have retreated on, legal aid does not arouse middle-class passions. And many Lib Dems believe Ken Clarke is their kind of justice secretary. To a certain extent, he is - he believes locking people up is generally a poor use of public money (though post-riots that argument is out of fashion). But the legal aid cuts, in many instances, are an assault on people's right to appeal the decisions public bodies make about them. So I too was pleased to see the Lib Dems voting to oppose them.

3.33pm: Martin Kettle reports back from the Guardian debate Midterm Makeover: what must the Liberal Democrats do next? where panellists responded to CiF readers' suggestions:

Trailing in the polls. Losing at the ballot box. The economy on the slide. What should the Lib Dems do to get out of their hole? The Guardian's fringe meeting at the Lib Dem conference brought together four of the party's finest to try to answer that question — and to give their responses to the answers put forward by CiF readers and writers over the last two weeks.

First, the four panellists were asked by chair Simon Hoggart to name the one policy that they thought the Lib Dems should promote to offset any midterm blues. Paddy Ashdown didn't have a policy exactly, but he certainly had an attitude; the important test for the party is hold its nerve and frame everything as part of a policy of encouraging powerful citizens in strong communities with an enabling government in an internationalist world. Tim Farron was more specific: the party had to move on affordable and social housing. More particularly, he wanted councils to be able to resume house building and to have the right to scrap the right to buy and to be able to take action against excessive second home owners. Lynne Featherstone highlighted the riots and said the Lib Dems should focus on a criminal justice system that wasn't working. If 75% of riot defendants had previous convictions, it is a sign of an ineffective system. Vince Cable, who is having a busy day, said the party needed to focus on communicating better, but also needed to engage more assertively with difficult issues like Europe and reforming the tax system.

The CiF threads had highlighted five specific issues that were added to the others already on the table: tax breaks for companies with narrow pay differentials between boardroom and shopfloor; legalising cannabis; free universal nursery care; stronger pro-European stances; and positive discrimination for women, including all-women shortlists. Some of these triggered good debates — Europe and women shortlists in particular. Ashdown said he supported legalisation of cannabis but didn't think it was a top order issue at the moment. Cable said that he wasn't in favour of creating complicated tax incentives for companies, and pointed out that Goldman Sachs probably had the narrowest differentials of any company in the City, because they were all millionaires. No one, it must be reported, had anything at all to say about the fifth CiF idea on universal nursery care.

Questioners from the floor raised a range of other issues. Should the Lib Dems think of themselves as the engine or the brake of the coalition, asked one; the overwhelming impression of the debate was that the Lib Dems want to be the engine. Chided about the lack of discussion on the environment, Farron pleaded guilty on that one. But the three most striking things (four if you count Farron's call for more council housing) to come out of the fringe debate were these:

First, that the Lib Dems are a massively pro-European party. Ashdown, in particular, argued that European integration remained vital, in spite of the fact (which he acknowledged) that the argument had been increasingly lost. Europe can't be a small collection of sovereign corks bobbing around in the water behind other the rest of the world's ocean liners, he said. If the Lib Dems don't make the argument for Europe, no one else will.

Second, the Lib Dems want to be more aggressive in addressing their own predominant maleness and whiteness. Lib Dems don't like women-only shortlists, but the impression from the meeting was that it's the only way for the party to expunge its shame on the equality issue. Featherstone said she took her hat off to Labour for having pointed the way. Farron said it was time to rig the rules. And Ashdown said it was time to crack the nut.

Finally, this is a party which is in a grim electoral place but which is determined not to panic. We are part of the coalition, said Featherstone. She had no qualms. We've been here before, said Farron, and we'll get out of this hole. There have been more Lib Dem electoral gains in the last three months than Labour and Conservative gains put together, Ashdown claimed. I liked Farron's final thought best. He wouldn't want to pay any compliments to Alex Salmond, Farron said, but the SNP leader has managed to pull off the trick of being both in government and in opposition at the same time. The Lib Dems would love to have the best of both worlds too. But that's not on offer right now.

3.18pm: Columnist Jackie Ashley just came back from a lunchtime Fringe event with quite the surprising statement:

A surprise admission today from former Lib Dem leader Paddy Ashdown: his "greatest failure" was not getting more women MPs into Parliament. It must be something that came to him with hindsight, as during his eleven year tenure as leader, Paddy was not known for espousing feminist causes. But today's Guardian fringe meeting, where Paddy declared his regret, saw all the platform speakers condemn their dismal record on the representation of women as well as candidates from ethnic minorities. The mood of the delegates was strongly against all women shortlists, the mechanism which hugely increased the number of Labour women in Parliament. Equalities minister Lynne Featherstone has always supported the idea though, and now party president Tim Farron says they will have to be looked at if nothing else works. For now the Lib Dems are hoping their candidate leadership programme will do the job, but it's a big ask for a party which has only 7 women MPs out of a total of 57.

3.05pm:Anne Perkins has been watching events from London, and wonders what the future holds for Plan B:

This morning the Lib Dems agreed how they want to develop policy over the next three years: in effect it's the bones of their next manifesto. And you only need to try to imagine what's going to matter in 2015 to start to wonder if the party conference has been transferred to another part of the solar system.

It's not that there's any shortage of interesting ideas. Lib Dems are good at them. The trouble is that the entire programme feels divorced from the context of what, at least according to every speaker so far, will have been a full five years of coalition government – and will still be a terrifyingly bleak economic situation.

So far this week, there have been two strong messages from Birmingham: that economic times are dangerously difficult but even so the Lib Dems are making a difference. The announcement of the new Jaguar LandRover plant up the road which might just feasibly be claimed as proof of a real growth agenda, was no doubt planned as the backdrop to the Business Secretary, Vince Cable's conference speech that otherwise was filled with unremitting gloom.

But – especially in the light of this morning's alarming FT story warning of a previously undetected £12bn black hole – one question keeps nagging. Might there come a point when the Lib Dem analysis of what to do next is at such odds with George Osborne and the Conservatives' view that staying in the coalition becomes completely unsustainable? Never mind the Treasury, do the party strategists have a plan B?

Whatever the protests of a handful of refusenik Tories like Nadine Dorries, so far the Lib Dems have struggled to persuade the wider public that they really are making a difference . A Times poll this morning suggested less than one in five voters trusts the Lib Dems on the NHS, despite the claimed concessions. Part of the problem is that some of their most prominent ministers are also the ones who are most closely associated with cuts. As Polly Toynbee pointed out yesterday, even where ministers like Sarah Teather have negotiated "spending" announcements for conference, the truth is that they do not amount to anything more than a very small recompense for what has already been axed.

Vince Cable talks the talk on fairness – this morning he sounded as if he was about to mount a Churchillian appeal for the spirit of the Blitz (a great leveller, not only in architectural terms) – and he's undoubtedly sincere when he demands a more equal distribution of the pain. But it will take much more than a lid on executive pay before the country's highest earners are looking the squeezed middle in the eye.

In the past few days, even the IMF and The Economist have warned that the austerity is killing the patient. Yet Danny Alexander continues to brush aside talk even of a plan A-plus. Jeremy Hunt, the foreign office minister, spoke the blunt truth on the BBC's Politics Show this morning when he observed the Lib Dems came third in the election and 'didn't deserve' to be in government. He meant to imply that any gain was a bonus. But that formulation cuts both ways. This is a hung parliament. They do have real power: there is a nuclear option, they could, in extremis, pull the rug out from under it. The dilemma is that it is impossible to talk about - but imperative to know that it exists.

2.28pm: So what is the verdict on Vince Cable's speech? Read our panel, with contributions from David Blanchflower, Jill Treanor, Nicholas Shaxson and Tony Dolphin.

2.08pm: More from Damian Carrington, who over on the Guardian's environment website, asks:

What's up with Vince Cable? That's the question greens are asking as the business secretary again displayed his inner conflict on green growth in his speech to the Liberal Democrat party conference here in Birmingham on Monday ... The question is this: can green growth, investment in clean energy and transport, boost sustainable economic growth and provide much-needed jobs? There's a very persuasive case that the answer is yes, especially if it puts the UK's record private savings to productive work.

12.52pm: And now for something different, columnist Simon Jenkins thinks it's really not that bad for the Lib Dems, after all:

The Liberal Democrats really should cheer up. Ed Davey this morning and Tim Farron yesterday were right. The party has defied history. It has enjoyed its first taste of political power in over half a century, after coming third in the 2010 general election. It leapt into the coalition and most pundits gave it two years at most. Eighteen months later, is still there.

Nick Clegg may look tired and miserable. The Conservatives may be provocatively cocky. The Lib Dems did lose 700 local councillors this spring and are down to single figures in the polls. But most junior coalition partners in these circumstances evaporate, especially when they have as little political definition as the Lib Dems.

Nor have the Lib Dems just survived. Only a fool could argue that they have had no influence on the Cameron government. They clearly altered the content or tone of the health bill, university fees, school subsidies and Europe. They have helped Ken Clarke in his penal reforms, have goaded the government on bankers and spent recklessly on green energy subsidies. The Lib Dems made little dent on the economy or on Cameron's wars, but for a party in their position, their coalition team have delivered, and deserve thanks. I repeat, they should cheer up. I give them not two years but four.

12.45pm: Vince Cable has just finished giving his speech. We'll have more analysis on this soon, but if you want the gist of it:

12.20pm: In an hour's time, the first of our annual debates begins, this year on the theme of what the parties' midterm manifestos should be. A few weeks ago Michael White asked for your policy suggestions, and on Saturday, we published the ones chosen by Michael and Martin Kettle for the Liberal Democrat conference. Later, Martin will be reporting back from the debate.

11.43am: Earlier this morning, reader GoogleWhack has asked us to get something on the drug policy discussion that took place yesterday. We grabbed columnist John Harris and asked him to weigh in:

Though the seemingly reduced turnout at this year's Lib Dem conference is brimming with the usual political-class stereotype (twenty-something, besuited, ambitious in the cause of nothing in particular), the acquisition of power has not quite snuffed out the more imaginative elements of the party's soul. The proof: yesterday's motion (pdf, see F20) on a review of the UK's drug laws, championed by Tom Brake MP, and passed overwhelmingly.

In the midst of a conference season that'll be dominated by jabs at the rich, post-riots pops at the poor, and mounting unease about the state of the economy, it was an anomalous episode: proof of a lingering beard'n'sandals defiance, and comically easy to shoot down as an example of a party with a skewed sense of priorities. But fair play to them: it's massively refreshing to see a party in power refusing to drop this long-standing hobby-horse, and continuing to push the idea that, to quote the old legalise-weed advert, our drug laws are immoral in principle and unworkable in practice.

Read the motion, and you get the rare sensation of the argot of politics being used in the cause of incontestable good sense: in this vision of things, Britain would learning from heroin-maintenance clinics in Holland and Switzerland, copy the Portuguese reforms that have decriminalised possession of all drugs, and push "healthcare, education and rehabilitation, not punishment."

"Liberal Democrats are the only party prepared to debate these issues," ran the subsequent press blurb. It's lamentably true. But will any of this get anywhere near government? [Writer inhales deeply, doesn't hold breath…. ]

11.24am: "Good people in a bad situation": in the thread below, columnist Martin Kettle posted a telling comment about the mood here in Birmingham. I am reposting it here:

Sitting in the Monday morning sessions at Birmingham is like being in a time warp. It's as if the 2010 election, the hung parliament, the coalition with the Conservatives and the deficit reduction programme, the fees debacle and the cuts had never taken place. It is like being in an old-style Liberal Democrat conference. A prelapsarian experience. A before the fall moment.

Why so? Because the debates on phone hacking and then on the riots show the Liberal Democrats as what, on one level, they indisputably are. They are people who are outraged by invasions of privacy, angered by overmighty media intrusions, reflexively suspicious of the police's misuse of power, instinctively on the side of the individual and of human rights and fundamental freedoms. These were debates inspired by the outrage of outsiders. In neither debate was there the slightest hint that the party might need to negotiate its own views with any other party, Labour or Conservative, or with the world beyond the bubble.It's easy to forget, amid all the fervour of the arguments about what this party has done since May 2010, and all the denunciations that still ricochet so noisily around the blogosphere, that Liberal Democrats are reflexive liberals before they are anything else.

Even after eating the forbidden fruit of coalition government they are still the only party on the left which possesses the nerve of outrage about abuses of liberty and rights. The problem, as the hall this morning also bore witness, is that there aren't that many of them. The debates I sat through were unanimous in their indignation, but they were sparsely attended. In other words, these debates were a reminder both of the Liberal Democrats' strength — their liberalism — and their weakness — the battering which they have taken over the past 18 months at the polls. Birmingham embodies the Lib Dem duality. Good people in a bad situation.

Lib Dem party president Tim Farron, the surprise hit of the conference so far Photograph: Dan Kitwood/Getty Images

11.10am: Speaking of Tim Farron - don't miss his comment piece on local politics and community, which we published last night. Here's more from columnist Jackie Ashley on his well-received speech:

It's a rare man (more rarely still a woman) who can make a great conference speech. Saturday's opening rally here in Birmingham featured some okay-ish attempts at wit, humour and rabble rousing from the likes of Don Foster, David Heath and Sarah Teather, but the audience were hardly rolling in the aisles.

So it was even more impressive, after that, to see Tim Farron, the party president and rising (or should that be risen) star make his address to conference yesterday. It was delivered in the latest Cameron/Ed Miliband style – ambling around the platform, arms waving wildly, seemingly unscripted. Farron was good last year, stepping in at short notice to replace Charles Kennedy, but this was much, much better. He was cheeky but loyal, chatty but passionate. He won a big standing ovation and Lib Dems on the way out were falling over themselves to praise him.

He won a cheer for telling the conference what brought him into politics: "homelessness, poverty and inequality"; laughter for admitting that he so nearly gave it all up after endless defeats, and applause for announcing that he had sent an advance copy of his speech to Oliver Letwin, not because he had to clear it in advance, "but just to wind him up".

Farron became the Lib Dems' president a year ago and has managed to keep his hands clean of the most controversial decisions made by the Coalition. He voted against the trebling of tuition fees and yesterday predicted that the Coalition "marriage" would not last. It's no surprise he's the delegates' darling.

But it's his natural easygoing style that marks him out – a strong Lancashire accent, and a total lack of pomposity. He would certainly do a lot to win back those younger voters who "agreed with Nick" before the last election and are now furious about the tuition fees decision.

Should Nick Clegg bow to Miriam's wishes and serve only one term, or if things fall apart, it's hard to see who could beat Farron to the job next time round. His only problem might be the boundary commission review, which means his 12,000 majority in Westmorland and Lonsdale could disappear.

An unwelcome ghost from the past has appeared outside the Lib Dem banquet here in Birmingham: a skeleton-clad protester against nuclear power. The party opposed nuclear power, until entering government with former nuclear sceptic Chris Huhne now leading the building of a new fleet of reactors as secretary of state for energy and climate change.

Protester Stewart Holmes has been shouting questions at entering delegates: "Who is favour of nuclear power? Who is insuring nuclear power?" Huhne, Nick Clegg and Vince Cable have all failed to answer, says Holmes. "The LibDem position is that there will be no public subsidy for nuclear power, but government will end up footing the bill if there is an accident. Therefore, there is a subsidy," says Holmes.

Holmes, alone but waving a "Nukiller power" banner, has an alternative. It centres on super-allotments and vegetarianism which while sounding tasty, doesn't seem to directly address the energy trilemma of cost, carbon and continuity of supply.

Inside the conference, green LibDems I spoke to seemed less perturbed by the party's nuclear U-turn, using the responsibility of attaining real power as a reason: "We need to make hard choices," said one. Another delegate thinks there is a motion at the conference for a windfall tax on nuclear operators, to claw back millions in subsidy given via a carbon tax. But the agenda doesn't mention the word "nuclear" once, despite the promise of LibDem backbench rebellion in July. So there we have it: what was once a LibDem article of faith is now fading to a mere spectre on the sidelines.

10.38am: The word on the street is that the name on everyone's lips this morning is Tim Farron, the Liberal Democrats' president, who delivered quite the impressive speech yesterday. We'll have more analysis on this soon, but it seems columnist Jackie Ashley agrees with what seems to be the consensus. What are your thoughts?

Great speech from Tim Farron - surely the next leader? Makes others look so stuffy.

"David Cameron's eloquent description of what he calls the Big Society is what I would call the Liberal Society", said Nick Clegg. That was 15 months ago, and in these days of differentiation, he would never put it that way. But there is something in the observation. All politicians these days – Labour as well as the coalition parties – scramble to get a footing on the slippery terrain between citizen and state, whether they call it community, civil society or voluntarism (so ubiquitous is the interest that the closely related idea of "social capital" is reported to have found its way in to Colonel Gaddafi's tent).

Last night I chaired a fringe on the Big Society, where representatives of the three political tribes tried and failed to disagree. Red Tory Philip Blond railed against economic liberalism for atomising communities, but he conceded that there were also civic strands of the liberal tradition which were impeccably community minded. Mike Storey, a long term Lib Dem city councillor who is now in the Lords, said he had no truck with Blond's highfalutin' theories, but went on to hail a grassroots outfit which had overpowered the bureaucracy to create jobs. Blond quite reasonably insisted that this was the Big Society in action. Andy Harrop of the Fabians added some caveats about retaining national standards, but nonetheless endorsed much of what the others had said. Questions from members on the floor were likewise polite, concerned with details about whether the Big Society should take its lead from elected councillors, professionals or concerned citizens.

It may be Dave's big idea, but in sum it got at least as fair a hearing here in Birmingham as it would have done at the Tory's own conference. At one level that is understandable: it is self-evident that volunteers will do things with commitment, and the political theory about active citizenship is rich and interesting. But here's the rub – for the most part it remains just that: political theory. Away from conference season jamborees, it is not charities but big businesses who are cleaning up on the Work Programme contracts.

For all the undoubtedly interesting ideas, as community centres begin slamming their doors in response to the cuts, I fear that the letters BS could return to an earlier, and cruder meaning.

9.32am:Libby Brooks arrived smiling in the press room. The reason? Her tweet from a Fringe event last night was chosen as "tweet of the day" by none other than the Daily Mail. Here is it for posterity:

9.21am:Julian Glover has read the newspapers this morning so you don't have to. Here is his news roundup:

It all comes down to money. The Guardian and the Independent lead with - and others report with different degrees of enthusiasm - Vince Cable's plans for capping city pay but the story of the day isn't from Birmingham at all.

The Financial Times has carried out a private analysis of the structural deficit - that part not made up of short-term variations in things like welfare payments - and has concluded that in this year alone the black hole is £12bn - or 25% - bigger than thought. The economy, it says, has less capacity than previously expected to grow - which means cuts or tax rises would have to go further if the chancellor wants to stick to his plan to eliminate it during this parliament. The paper implies that the independent Office of Budget Responsibility agrees with its figures.

The gap is the equivalent of 2.5% extra on VAT or big cuts for some departments - which would provoke shivers of horror from Lib Dems here at their conference, where the mood is more Keynes than Hayek. The Guardian gives the most space to Cable's speech on rebalancing capitalism and bringing forward spending on infrastructure - though arguably his interview with the paper published on Saturday was stronger. Today's report also mentions a Lib Dem plan to sell British 50-year bonds in the hope of escaping short-term pressure from the markets.

In the Daily Mail all this is seen through the other end of a telescope: "the Lib Dems plan to soak the rich with a triple raid on income tax, executive pay and tax avoidance". That will teach Nick Clegg to be rude about the paper on the Andrew Marr show. Inside Quentin Letts makes a new star of Lib Dem president Tim Farron to a party of "single issue oddballs with Bobby Moore hairdos and polyester trousers shiny-stained by inadequacy".

The Times also makes much of Farron's pitch for the post-coalition party leadership. It also has a poll showing the party is the least trusted on the NHS - but that 58% of all voters are glad David Cameron agreed to coalition and that 55% think the Lib Dems have some influence in government and 17% a lot of influence. Some comfort there from a paper whose conference diary notes the Lib Dems are meeting not in the main Birmingham hall used by the Tories last year, nor the second-biggest but a smaller space that their coalition partners used for exhibition space.

9.15am: Good morning and welcome back to the comment rolling blog, live from the Lib Dem conference. Yesterday we had writers Zoe Williams, Polly Toynbee, Julian Glover, Tom Clark, Libby Brooks, Jackie Ashley and Dan Sabbagh participating, as well as tweets from our wider comment team. We'll bring you more today - opening with Julian Glover's newspapers roundup - but we'd love for you to tell us what you'd like to see more of (or less of!) today. We will aim to please.

As always, please post requests and questions to our writers in the thread.